As
a
business
owner,
you
deserve
to
be
taking
maximum
advantage
of
qualified
plans
available
to
you.
Your
qualified
plans
--
401(k)s,
IRAs,
SIMPLE
IRAs,
etc.
are
almost
bulletproof
up
to
$1
million.
If
the
worst
happens
to
your
business,
those
funds
could
become
your
only
financial
lifeboat.
Don't
neglect
this
gift
of
security
from
creditors
and
potential
judgments.
During
the
month
of
September
you
need
to
decide
whether
a
Safe
Harbor
provision
for
2013
makes
sense
for
you,
and
get
that
election
in
place.

Many
401(k)
plans
operate
on
a
calendar
year
basis,
and
right
now
is
a
good
time
to
reconsider
your
401(k)
options
as
an
employer.
This
topic
came
up
in
a
recent
CEBI
Local
Board
meeting.
The
discussion
centered
around
Safe
Harbor
provisions,
something
that
must
be
declared
and
communicated
prior
to
the
beginning
of
the
plan
year,
and
can
be
changed
in
subsequent
plan
years.
Safe
Harbor
provisions
fit
into
the
"fairness"
provisions
in
the
401(k)
statute.
Congress
wanted
to
make
sure
owners
and
executives
didn't
set
up
401(k)
plans,
forget
to
tell
their
employees
about
them,
and
then
take
maximum
advantage
(in
the
forms
of
maximum
contributions
and
company
matches)
for
themselves
alone.
So
the
concept
of
"participation
testing"
was
implemented.
Simply
described,
the
"top
heavy"
and
"highly
compensated"
tests
limit
the
maximum
participation
of
owners
and
highly
compensated
employees,
proportional
to
participation
of
lower-paid
workers.
You
may
have
had
the
unfortunate
experience
of
getting
a
taxable "refund"
of
your
401(k)
contributions
after
the
fact,
due
to
over-contributing.

These
participation
tests
rarely
work
out
so
those
who
wish
to
max
out
their
401(k)
contributions
can
actually
do
so.

Let's
also
review
the
allowable
maximum
contributions
(if
not
limited
by
participation
testing).
For
2013,
those
are
$17,000
for
most
employees,
with
a
"catch-up"
provision
of
an
additional
$5,500
for
those
over
50
--
a
total
of
$22,500
annually
for
that
group.

And
it's
also
a
good
time
to
point
out
that
a
Roth-style
401(k)
offering
is
now
available.
If
you
already
have
plenty
of
pre-tax
deferred
income
in
either
a
401(k)
or
IRA,
you
can
amend
your
plan
to
allow
participants
to
designate
their
contributions
as
Roth-style,
meaning
that
despite
paying
taxes
on
the
income
now
(at
historically
low
tax
rates),
the
income,
dividends
and
growth
in
net
asset
value
are
tax
free
forever!
Of
course,
the
company
match
contributions,
since
they're
deductible
to
the
company,
go
into
a
parallel
account
that's
considered
pre-tax.

Whether
you're
interested
on
your
own
account
or
not,
you
should
amend
your
plan
now
to
make
a
Roth
option
available
to
your
401(k)
participants.

So,
how
can
you
make
the
most
of
these
extraordinary
opportunities
for
yourself
as
an
owner?
The
Safe
Harbor
provisions
allow
you
to
make
company
contributions
in
either
of
two
ways,
thereby
nullifying
all
participation
testing.
Those
two
ways
are:

A
3%
(of
salary)
match,
automatic,
across
the
board,
regardless
of
the
employee
contribution,
for
all
eligible
employees.
Eligibility
is
usually
based
on
a
waiting
period
after
initial
hire
and
a
minimum
number
of
hours
worked
in
a
year,
as
specified
in
your
plan.

or

A
specific
(or
better)
employer
match
formula
of:

100%
of
the
first
3%
of
employee
contributions

plus
50%
of
the
next
2%
of
employee
contributions

Thus,
for
an
employee
contributing
at
least
5%,
the
company
would
match
4%.
For
an
employee
contributing
nothing,
the
match
is
0%.

In
the
CEBI
meeting
where
this
was
discussed,
one
member
said
he
had
done
the
math,
and
changing
his
existing
match
formula
to
the
Safe
Harbor
formula
would
cost
him
about
$30,000
in
additional
match
--
far
more
than
the
value
of
himself
and
his
partner
being
able
to
max
out
their
contributions.

A
member
in
another
meeting
had
mentioned
that
he
went
to
the
3%
Safe
Harbor
option
one
year,
in
lieu
of
pay
raises.
Now,
said
the
member
who
had
done
the
matching
math,
"That's
an
idea
worth
looking
at."
Note
that
a
3%
"raise"
through
the
401(k)
is,
in
fact
more
than
3%,
considering
that
both
you
and
the
employee
also
save
the
combined
FICA
burden
of
11.5%.
That
saves
you
0.23%
of
salary,
and
the
employee
saves
slightly
less.

As
always,
these
are
ideas,
not
recommendations.
Consult
your
own
legal,
benefits
and/or
tax
advisors
before
taking
any
course
of
action,
to
ensure
they
are
appropriate
for
your
own
specific
situation.

If
you
do
decide
to
amend
your
plan,
this
is
a
good
time
to
put
those
wheels
in
motion
--
call
your
401(k)
fiduciary
today
and
be
sure
you
understand
the
timeline
necessary
to
get
plan
changes
in
place
for
2013.
You
must
get
your
plan
amended and
provide
notice
to
Safe
Harbor-eligible
employees
not
less
than
30
days
before
the
new
plan
year.